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Best way to purchase office?

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  • Best way to purchase office?

    Hello, currently we are renting medical office space but now have the opportunity to purchase it. It is in a medical condo building. Her practice is an S Corp. Is there any recognized "best way" to purchase it or what are the pros/cons of each? I.e. between her existing practice S Corp buying it, starting a different corporation to buy it (I noticed another doc in the building seems to have this), or buying it personally & then renting to the practice? Either way we would use a mortgage.
    Thanks for your help.

  • #2
    No idea about the best way but when I purchased my office I opened a separate LLC and purchase jointly in the name of wife and mine so that 50% of the asset is hers. The medical practice is a S corp and is just in my name alone.

    The practice pays the market rate rent to the building LLC.

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    • #3
      Open a separate legal entity , no sense in a building getting tied up in a malpractice suit if you can avoid it.

      My practice is a PC, C corp
      My building is a partnership S

      Charge the highest possible rent as allowed under the law so distributions come through with out the additional corp taxes

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      • #4
        Originally posted by Random1 View Post
        Open a separate legal entity , no sense in a building getting tied up in a malpractice suit if you can avoid it.

        My practice is a PC, C corp
        My building is a partnership S

        Charge the highest possible rent as allowed under the law so distributions come through with out the additional corp taxes
        Aren’t taxes only applied to retained profits at your C Corp? You’d still be able to distribute profits to owners and avoid C Corp taxation. The better question is whether it’s more or less efficient from a tax perspective (and what the returns are) to have the marginal tax rate applied now at the practice level profit distributions vs have potential profits shifted to an entity that can reduce paper profits (and the long term cash flows of this decision, including after tax distributions at time of buy out).

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        • #5
          S corporation taxable income passed through to a shareholder-employee and S corporation cash distributions paid to a shareholder-employee generally are not subject to federal employment taxes.

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          • #6
            Distributing C-Corp profits (aka dividends) to the shareholders doesn't reduce the corporate level tax. Only paying salary or rents will.

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            • #7
              I not an accountant , but the way I understand it , my practice pays my business that owns my office the maximal amount allow by law. This decreases profits of the C corp moving it to income of the S corp. I depreciate the office building which decreases the potential earnings of the office business , so it has less reportable income to be taxed on. The profit is distributed through the S corp as dividends decreasing federal taxes on the income.

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